In­vestors turn cau­tious as fears of a bub­ble loom

Af­ter a mas­sive cap­i­tal in­jec­tion into the vir­tual re­al­ity (VR) sec­tor from the end of 2015, in­vestors are now be­com­ing more cau­tious as an in­creas­ing num­ber of play­ers en­ter the mar­ket, fu­el­ing a bub­ble in the emerg­ing sec­tor.

Ac­cord­ing to a re­port by US con­sult­ing firm CB In­sights, the VR deal vol­ume world­wide plunged 37.8 per­cent over the sec­ond quar­ter of 2016 to 23 per­cent from the fourth quar­ter of 2015, when deal vol­ume reached its peak of 37.

The amount of in­vest­ment in the VR in­dus­try also ex­pe­ri­enced the same de­cline.

A to­tal of $120 mil­lion were raised by com­pa­nies in the in­dus­try over the sec­ond quar­ter of 2016, rep­re­sent­ing a 42.3 per­cent drop from $208 mil­lion over the last three months of 2015, the re­port said.

“At the mo­ment, we can­not say that the win­ter for VR en­ter­prises has come, but in­vestors are tak­ing a more cau­tious at­ti­tude,” Zhao Zim­ing, an an­a­lyst at Bei­jing­based con­sul­tancy Analysys In­ter­na­tional, said.

“This helps pro­mote healthy com­pe­ti­tion in the in­dus­try and is ben­e­fi­cial to its long-term Zhao said.

He added that the mar­ket space left for small and medium-sized mar­ket play­ers is be­com­ing smaller, as tech gi­ants in­clud­ing Sony, HTC and Alibaba have marched into the in­dus­try.

“In­vestors are turn­ing from ‘in­vest­ing ex­ten­sively’ to ‘in­vest­ing pre­cisely’, be­liev­ing that pour­ing money into a few high-qual­ity en­ter­prises would bring them higher re­turns,” Peter Liu, vice-pres­i­dent of mo­bileVRtech­nol­ogy and op­er­a­tion provider Nibiru, said.

“But I be­lieve it is still the op­ti­mal time for VR in­vest­ment. The VR in­dus­try is still in its in­fancy. There is great po­ten­tial for fu­ture de­vel­op­ment, given its wide range of ap­pli­ca­tion fields.”

The Chi­nese VR in­dus­try has ex­pe­ri­enced ex­plo­sive growth since the end of 2015, with in­vestors plac­ing high ex­pec­ta­tions on the in­dus­try and pour­ing money into the fast-grow­ing num­ber of VR firms, cre­at­ing a bub­ble in the sec­tor. In­dus­try in­sid­ers warn that a num­ber of VR en­ter­prises de­vel­op­ment,” with­out core tech­nol­ogy could go bank­rupt as com­pe­ti­tion in­ten­si­fies.

“In­vestors are ea­ger to see re­sults, but it takes time to pro­duce them, es­pe­cially for a new tech­nol­ogy. Hav­ing a cau­tious mind­set while in­vest­ing may be good so money goes into places where it mat­ters,” said Ja­son Low, a Shang­hai-based an­a­lyst with Canalys.

Re­search con­ducted by Chi­nese e-com­merce gi­ant JD.com and mar­ket in­tel­li­gence firm IDC shows that more than 30 per­cent of users sur­veyed con­sider the short­age of con­tent as the pri­mary prob­lem.

Scarcity of VR in­dus­try ap­pli­ca­tions is also an is­sue. Ac­cord­ing to the re­search, 55 per cent of con­tent ven­dors are pro­duc­ing game con­tent, 40 per cent are pro­duc­ing en­ter­tain­ment con­tent, and only 5 per cent are pro­duc­ing in­dus­try ap­pli­ca­tions.